By Bo Erickson and Ann Saphir
WASHINGTON (Reuters) -A new task force in the Republican-controlled U.S. House of Representatives on Tuesday began an examination of the Federal Reserve’s role and goals, with Republicans raising questions about its track record on controlling inflation, and Democrats on watch for the impact of President Donald Trump’s freshly imposed tariffs and other economic policies.
Unlike some congressional task forces that mostly operate on the back burner, the Monetary Policy, Treasury Market Resilience, and Economic Prosperity Task Force’s inaugural hearing drew support from the committee’s top leadership, with both Chairman French Hill and the House Financial Services Committee’s top Democrat, Representative Maxine Waters, querying witnesses.
Each set the tone for their side of the aisle at the hearing, which comes as the Fed itself begins what’s expected to be a six-month review of its approach to achieving its congressionally mandated goals of price stability and full employment.
Hill aired concerns over the size of the Fed’s balance sheet and questioned the feasibility of the employment mandate, given the many forces that impact the labor market beyond central bank control, both longtime sticking points for Republicans critical of the Fed’s handling of the economy.
Though Fed Chair Jerome Powell has said the Fed’s 2% inflation goal will not be up for discussion in its own framework review, Hill said he felt the target is too high and unnecessarily erodes the public’s purchasing power.
Other Republicans took up that baton, but also touched on a wide range of other topics including ideas on how to ease regulation.
In one of the more heated moments, Republican Andy Barr forcefully advocated for stripping the Fed of its responsibility to fund the Consumer Financial Protection Bureau, which recently was put on ice by the Trump administration, and giving it instead to Congress.
Waters, the committee’s top Democrat, shook her finger and repeatedly mouthed the word “no” to nearby colleagues.
Waters for her part called out the rising price of eggs and the potential for Trump’s new tariffs to make inflation worse, a point that several other Democrats also took up.
Other Democrats, like Representative Juan Vargas from California, questioned Trump’s executive order asserting control over independent government agencies, which he said could threaten the Fed’s independence and thus its effectiveness in fighting inflation. Mike Konczal, former chief economist for the Biden administration’s National Economic Council, told the panel that though the order carves out the Fed’s monetary policy from White House control, “there’s no way to have a strict wall of separation between monetary policy and regulatory policy.”
Fed watchers are waiting to see how the central bank will interact with and be responsive to the group. No current Fed policymakers appeared at Tuesday’s hearing. The Fed assiduously guards its monetary policy independence, which economists say is critical to a central bank’s ability to fight inflation effectively. At the same time Powell readily acknowledges that the central bank is accountable to congressional oversight.
The 14-member task force, led by Representative Frank Lucas from Oklahoma, features a mix of veteran lawmakers who have spent considerable time on issues related to the Fed. Eight of them have met with Powell at least once since he became chair in 2018.
(Reporting by Bo Erickson and Ann Saphir; Editing by Andrea Ricci)
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